1

INTRODUCTION

 The law relating to sale and purchase of goods, prior to

1930 dealt by the Indian Contract Act, 1872.
 In 1930, Sections 76 to 123 of the Contract Act was
repealed and a separate Act known as the Sale of
Goods Act, 1930 was passed.
 This act lays down special provisions governing the
contract of sale of goods .The general law of contract
is also applicable to the contracts for the sale of goods
unless they are inconsistent with the express provisions
of the Sale of Goods Act.
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 GENERAL PRINCIPLES
MEANING OF CONTRACT OF SALE

 According to Section 4 of the Act, a contract of Sale

means “a contract where the seller transfers or agrees to
transfer the property in goods to the buyer for a price”.

 Contract of Sale may be of two types

CONTRACTOF
SALE

SALE AGREEMENT TO SELL

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 ESSENTIALS OF CONTRACT OF SALE
 Two parties: There must be two parties- a buyer and a seller to
constitute a contract of sale.

 Goods: Contract of sale relates to goods i.e., movable property .

Transaction involving purchase and sale of immovable property are out of
the purview of the Sale of Goods Act.

 Transfer of general property: The object of the contract must be the

transfer of general property as distinguished from the special property in
the goods by one person to another. The term ‘general property’ refers to
ownership of goods.

 Price: The consideration for the contract of sale called price must be
money.

 Essential elements of a valid contract: All the essential elements of a

valid contract must be present in the contract of sale. 4
SALE :
 It is a contract where the ownership in the goods is transferred by seller to
the buyer immediately at the conclusion of the contract

EXAMPLE: A sells his car to B for Rs. 3,00,000. It is a sale since the ownership
of the car has been transferred from A to B.

AGREEMENT TO SELL :
 It is a contract of sale where the transfer of property in goods is to take
place at a future date or subject to some condition thereafter to be fulfilled.

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 DISTINCTION BETWEEN SALE AND
AGREEMENT TO SELL
BASIS SALE
The property of goods passes
from the seller to the buyer
1. Transfer of
immediately. So the seller is
property
no more owner of the goods
sold. It is an executed
contract.
A sale can only be in case of
existing and specific goods
only.
2. Type of goods
In a sale if the goods are
destroyed , the loss falls on
3. Risk of loss
the buyer even though the
goods are in the posssession
of the seller.
AGREEMENT TO SELL
The transfer of property of the
goods is to take place at a
future time or subject to
certain conditions to be
fulfilled. It is an executory
contract.
An agreement to sell is mostly
in case of future and
contingent goods.
In an Agreement to Sell if the
goods are destroyed the loss
falls on the seller even though
the goods are in the
posssession of the buyer.
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 BASIS SALE
In a sale the buyer fails to pay
the price of goods (or) if there
is a breach of contract by the
4.Consequences
buyer the seller can sue for the
of the breach
price even though the goods
are still in his possession
In a sale the seller cannot re-
sell the goods.
5. Right to re-
sell
AGREEMENT TO SELL
If there is a breach of
contract by the buyer the
seller can only sue for the
damages and not for the
price.
The buyer who takes the
goods for consideration and
without notice of the prior
agreement gets him a good
title. He can resell if he
wants.
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 BASIS SALE AGREEMENT TO SELL
In a sale if the buyer In an Agreement to Sell ,
becomes insolvent before If the buyer becomes
he pays for goods, the insolvent and has not yet
seller in the absence of paid the price the seller is
the lien over the goods, not bound to part with
6. Insolvency of buyer must return them to the the goods until he is paid
official receiver or for.
assignee. He can only
claim the rateable
dividend for the price of
the goods.
In a sale the seller If the buyer who has paid
becomes insolvent, the the price, finds that the
buyer being the owner is seller has become
7. Insolvency of the entitled to recover the insolvent he can only
seller goods from the official claim a rateable dividend
receiver of the assignee. and not the goods
because property in them
has not yet passed to
him.
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 GOODS
Definition:
The subject matter of a contract of a sale must be goods .
According to Section 2(7) the term ‘goods’ means “every kind of
movable property other than actionable claims and money and
includes stock and shares , growing crops , and things attached to
or forming part of the land which are agreed to be severed before
sale or under the contract of sale” Specific
Types of goods:
Exiting goods
Ascertained

GOODS Future goods

Unascertained
Contingent goods

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1. Existing goods: These are the goods which are owned or
possessed by the seller at the time of sale. Only existing
goods can be the subject of a sale.
a) Specific goods: Goods identified and agreed upon at the
time of making of the contract of sale of goods.
b) Ascertained goods: Goods identified subsequent to the
formation of the contract of sale. The terms ascertained
and specific, are commonly used for same kind of
goods.
c) Unascertained or generic goods: Goods not identified or
agreed upon at the time of making of the contract of
sale. They are the goods defined for description only.
Example: ‘A’ who wants to buy a television set goes to a showroom
where four sets of models are displayed. He sees the performance of a
particular set, which he agrees to buy. The set so agreed to be bought
is a specific set. If after having bought one set he marks a particular
set, the set so marked becomes ascertained. Till this all is done all sets
are unascertained. 10
2. Future goods: Goods to be manufactured, produced or
acquired after making of the contract are called future goods.
Example: ‘A’ agree to sell B all the milk that his cow may yield during the
coming year. The contract is a contract for the sale of future goods.

3. Contingent goods : Goods, the acquisition of which by the

seller, depends upon an uncertain contingency are called
‘contingent goods’. They are also a type of future goods.
Example: ‘A’ agrees to sell 100 units of an article provided the ship which is
bringing them, reaches the port safely. This is an agreement for the sale of
contingent goods.
A agree to sell to B a specific rare painting provided he is able to purchase
it from its present owner.

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 PERISHING OF GOODS

Perishing of goods before making of the contract(Sec. 7)

Where there is a contract for the sale of specific goods, the contract is
void if the goods without the knowledge of the seller have, at the time
when the contract was made, perished or become so damaged as no
longer to answer to their description in the contract.
 Illustration
Facts: ‘A’ agrees to sell to ‘B’ a certain horse. It turns out that
the horse was dead at the time of bargain, though neither party was
aware of the fact. Discuss the validity of the contract.
Solution: The agreement is void. In case part of goods is
perished, the following rule applies :
(a)if contract is indivisible, it shall be void; and
(b)if contract is divisible, it will not be void and the part available in
good condition must be accepted by the buyer
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Goods perishing before sale but after agreement to
sell (Sec.8)
Where there is a contract for the sale of specific goods, the contract is
void if the goods without the knowledge of the seller have, at the time
when the contract was made, perished or become so damaged as no
longer to answer to their description in the contract.
 Illustration
Facts: A buyer took a horse on a trial for 10 days on condition that
if found suitable for his purpose the bargain would become
absolute. The horse died on 5th day without any fault of either
party. Discuss the position of both parties.
Solution :The contract , which was in the form of an agreement
to sell, becomes void and the seller shall bear the loss.

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 PRICE
Sec.2(10) defines price “as money consideration for
a sale of goods”.
 It forms an essential part of the contract.

 It must be expressed in terms of money.

 It is not essential that the price should be fixed at the

time of sale. It must, however, be payable, though it
may not have been fixed.
Ascertainment of price
 Price in a contract of sale may be
 fixed by the contract itself, or
 left to be fixed in an agreed manner, or
 determined by the course of dealing between the
parties[Sec. 9(1)] 14
 In the absence of this, the buyer must pay to seller a
reasonable price. What is the reasonable price is a
question of fact dependent on the circumstances of
each particular case[Sec. 9(2)]

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CONDITIONS AND
WARRANTIES

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 CONDITIONS AND WARRANTIES
MEANING OF CONDITION AND WARRANTY
 A stipulation in a contract of sale with reference to
goods which are the subject thereof may be a
condition or a warranty[Sec. 12(1)].
 Condition:
A condition is a stipulation essential to the main purpose
of the contract, the breach of which gives rise to a right
to treat the contract as repudiated. [Sec 12(2)]
 Warranty:
A warranty is a stipulation collateral to the main purpose
of the contract, breach of which gives rise to a claim for
damages, but not a right to reject the goods and treat the
contract as repudiated. [Sec 12(3)]
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 DIFFERENCE BETWEEN
CONDITION AND WARRANTY
BASIS CONDITION
1. Nature Condition is of a fundamental
nature.
Condition is a stipulation which Warranty is only collateral to
is essential to the main
purpose of the contract.
2. Value
If there is breach of condition,
3. Breach the aggrieved party can
repudiate the contract.
4. Treatment A breach of condition may be
treated as a breach of
warranty. This would happen
where the aggrieved party is
contented with damages only.
WARRANTY
Warranty is of a secondary.
nature.
the main purpose of the
contract.
In case of breach of warranty,
the aggrieved party can claim
damages only.
A breach of warranty ,
however, cannot be treated as
a breach of condition.
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 BASIS CONDITION
4. Example A man asks a dealer to supply
him with a quiet horse and the
dealer supplies him with a
vicious one, the stipulation is a
condition, and the buyer can
return the horse and can also
claim damages for breach of
contract. (Hartley vs Hyman)
WARRANTY
A man buys a particular
horse which is warranted
quiet to ride and drive. If the
horse turns out to be vicious,
the buyer’s only remedy is to
claim damages.
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 When breach of condition is to be treated as breach of
warranty[Sec.13]

o Voluntary waiver by the buyer: Where a contract of sale is

subject to any condition to be fulfilled by the seller, the buyer
may waive the condition or elect to treat the breach of the
condition as a breach of warranty. [section 13(1)].
o Acceptance of goods by the buyer: Where a contract is
indivisible and the buyer has accepted the goods or part
thereof, the breach of any condition to be fulfilled by the seller
can only be treated as a breach of warranty ,unless there is a
term of the contract, express or implied, to that effect. [section
13(2)].
o Meaning of Acceptance:
o When buyer intimates the seller
o When he does any act inconsistent with the ownership
o After the lapse of reasonable time
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 EXPRESS AND IMPLIED
CONDITION AND WARRANTIES

 Conditions and warranties may be express or

implied.
Express condition and warranties:
Express condition and warranties are those which have
been expressly agreed upon by the parties at the time of
contract of sale
Implied condition and warranties:
Implied condition and warranties are those which the
law incorporates into the contract unless the parties
stipulate to the contrary.

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IMPLIED CONDITION (Secs. 14 to 17)
IMPLIED
CONDITION

As to Title As to Description

As to Sample As to Quality or Fitness

As to Merchantability
As to Wholesomeness

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 Condition as to title[Sec. 14(a)]
In a contract of sale, unless the circumstances of the contract
are such as to show a different intention, there is an implied
condition on the part of the seller that –
a)In the case of a sale, he has a right to sale the goods, and
b)In the case of an agreement to sell, he will have a right to
sell the goods at the time when the property is to pass.
Example: R bought a car from D and used it for 4 months. D had no
title to the car and consequently R had to hand it over to the true owner.
Held, R could recover the price paid [Rowland v. Divall(1923)2 K.B. 500]
 Condition as to description(Sec. 15)
 In sale by description there is an implied condition that the
goods shall correspond with description.
 This means “if you contract to sell peas, you cannot oblige the
party to take beans.”
 Hence if the description of the article tendered is different
then the buyer may not buy the goods. 23
 Example: A want to sell his typewriter. He says to B , intending buyer
who has not have seen the machine, that it is a brand new machine. B
agrees to purchase it . On delivery B finds that the machine is old and
repaired. B can repudiate the contract.
 Condition as to sample(Sec. 17)
A contract of sale is a contract for sale by sample where
there is a term in the contract, express or implied, to
that effect.
In a sale by sample, the following are the implied conditions:
1.The bulk shall correspond with the sample in quality;
2.That the buyer shall have a reasonable opportunity
of comparing the bulk with the sample; and
3.That the goods shall be free from any defects rendering
them unmerchantable, which would not be apparent on
reasonable examination of the sample.
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 Example: Certain shoes were sold by sample for the French Army. The
shoes were found to contain paper not discoverable by ordinary inspection.
Held, the buyer was entitled to the refund of price plus damages.
 Condition in a sale by sample as well as description
[Sec. 15]
The bulk of the goods must correspond with both, otherwise the buyer is
entitled to reject the goods.
 Condition as to quality or fitness[Sec. 16 (1)]
Normally, in a contract of sale there is no implied condition as to quality or
fitness of the goods for a particular purpose. The buyer must examine
the goods thoroughly before he buys them in order to satisfy himself.
But an implied condition is deemed to exist if the following conditions
are satisfied:
 The buyer, expressly or impliedly, should make known to the seller the
purpose for which goods are required.
 The buyer should rely on seller’s skill and judgement

 The goods sold must be of a description which the seller deals in the
ordinary course of business.
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 Example: An order was placed for some lorries to be used “for heavy
traffic in a hilly area”. The lorries supplied were unfit and breakdown.
There is a breach of condition as to fitness.

 Condition as to merchantability[Sec. 16(2)]

 Where goods are bought by description from a seller who
deals in goods of that description there is an implied
condition that the goods are of merchantable quality.
 This means goods should be such that they are commercially saleable,
as per the description by which they are known in the market at their full
value.
 R ordered for some 600 motor horns of varying description. Some of the
horns were dented and badly polished and R rejected the whole of the
consignment. Held, the defects in the horns had rendered them
unmerchantable and therefore the buyer was justified in rejecting the
whole consignment as the contract is indivisible (Jackson vs Rotax Motor
& Cycle Co.)

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 Condition as to wholesomeness
In the case of eatables and provisions, in addition to the implied
condition as to merchantability, there is another implied
condition that the good shall be wholesome, i.e., free from any
defect which render them unfit for human consumption.
Example: F purchased milk from A , a milk dealer. The milk
contained typhoid germs. F’s wife, on taking the milk, got
infection and died. Held, F can entitled for damages
(Frost vs Aylesbury Dairy Co. Ltd.)

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 IMPLIED WARRANTIES
IMPLIED WARRANTIES

Quiet possession Dangerous

Nature

Freedom from
Encumbrance

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 Warranty of quiet possession[Sec. 14(b)].
In a contract of sale, unless there is a contrary intention, there is an
implied warranty that the buyer shall have and enjoy quiet possession of
the goods. If the buyer quiet possession is in any way disturbed because
of seller’s defective title to sell, he can claim damages from the seller.
The plaintiff, a lady, purchased a second hand typewriter from the
defendant. She thereafter spent some money on its repair and used it for
some months. Unknown to the parties the typewriter was a stolen one
and the plaintiff was compelled to return the same to its true owner. She
was held not merely the price paid but also the cost of repair.
 Warranty of freedom from encumbrances[Sec. 14
(c)].
The goods are not subject to any charge or right in favour of a third party
not declared or known to the buyer before or at the time of contract. If
the goods are found to be subject to a charge and the buyer has to
discharge the same, there is a breach of warranty and the buyer is
entitled to damages.

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 A the owner of the watch pledges it with B. after a
week, A obtains possession of the watch from B for
some limited purpose and sells it to C. B approaches C
and tells him about the pledge affair. C has to make
payment of the pledge amount to B. there is breach of
warranty and C is entitled to claim compensation from A.

 Warranty to disclose dangerous nature of goods

Where a person sell goods, knowing that the goods are
inherently dangerous or they are likely to be dangerous
to the buyer and that the buyer is ignorant of the
danger, he must warn the buyer of the probable danger,
otherwise he will be liable in damages.

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 DOCTRINE OF “CAVEAT EMPTOR”
 Caveat Emptor is a Latin phrase meaning
“let the buyer beware”.
 Let the buyer beware: IT is the duty of the buyer to be
careful while purchasing goods of his requirement and in the absence of
any enquiry from the buyer, the seller is not bound to disclose every defect
in goods of which he may be cognizant.
For example, you buy a used car which you are told is in perfect condition,
but it immediately breaks down OR you buy a house, but it has
termites.

 A purchases a horse from B. A needed the horse for riding but he did not
mention this fact to B. the horse is not suitable for riding but is suitable
only for being driven in the carriage. A can neither reject the horse nor can
he claim any compensation from B.

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 Exceptions
 Mis-representation
 Fraud
 Purchased by description
 Goods are not of merchantable quality
 Bought by sample
 Bought by sample as well as description
 Seller knows the purpose for which buyer requires the
goods
 An implied condition or warranty as to quality or fitness.

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TRANSFER OF PROPERTY

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 TRANSFER OF PROPERTY

 A contract of sale of goods involves transfer of

ownership from the seller to the buyer.

 Transfer of ownership is infact the main object

of making a contract of sale.

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 IMPORTANCE OF TRANSFER OF OWNERSHIP
It is important to know the precise moment of
time at which the property in goods passes
from the seller to the buyer for the following
reasons:-
1. Risk prima facie passes with ownership: Sec
26 provides that unless otherwise agreed in case of
destruction of or damage to the goods, it is the
owner who has to bear the loss because the
general rule is ‘res perit domino’ risk follows
ownership or whosoever is the owner must bear
the loss. The payment of the price or possession of
goods is immaterial.
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EXAMPLE:‘A’ contracts to purchase 30 tons of apple
juice from ‘B’.B crushes the apple, puts juice in
casks and keeps them ready for delivery. A ,
however , delays to take the delivery and the juice
goes putrid and has to be thrown away. A is liable to pay the
price[Demby Hamilton & Co. Ltd. v. Barden,(1949) All E R. 435]
2. Action against third parties: In case the goods have
been damaged by a third party, it is only the owner
who can take action against him.
3. Insolvency of the seller or the buyer: In the
event of insolvency of either the seller or the buyer,
the question whether the Official Receiver or
Assignee can take over the goods or not depends on
whether the property in the goods has passed from
the seller to the buyer. 12
 RULES REGARDING TRANSFER OF OWNERSHIP
 Goods must be ascertained
 Property passes when intended to pass.
 For Specific goods(Sec. 20 to 22)
 Passing of property at the time of contract (Sec.20)

Where there is an unconditional contract for the sale of

specific goods in a deliverable state, the property in the
goods passes to the buyer when the contract is made.
EXAMPLE: B offers A for his horse a sum of Rs.1000.The
horse is to be delivered to B on a fixed day and the price
is to be paid on another fixed day. A accepts the offer.
The horse becomes B’s property as soon as the offer is
accepted.

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 Passing of property delayed beyond the date of the contract
 Goods not in a deliverable state(Sec.21)

Where there is a contract for sale of specific goods not

in a deliverable state, i.e., the seller has to do something
to the goods to put them into the deliverable state, the
property does not pass until such thing is done and the
buyer has notice of it.
 When the price of goods is to be ascertained by weighing

(Sec. 22)
Where there is a contract for sale of specific goods in a
deliverable state, but the seller is bound to weigh,
measure, test or do some other act or thing with
reference to the goods for the purpose of ascertaining
the price, the property does not pass until such act or
thing is done and the buyer has notice thereof.
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 For unascertained/ ‘future’ goods Sec.23
In the case of a contract for a sale of unascertained or future
goods by description , property will pass from the seller to the
buyer when the goods of the same description, in a deliverable
state, are unconditionally appropriated to the contract by one
party with the consent of the other.
 Goods sent on approval or ‘sale or return’ Sec.24
When the goods are delivered to the buyer on ‘approval’ or on
‘sale or return’ basis, the property in the goods will pass from
seller to the buyer, when any of the following conditions are
satisfied.
 The buyer accepts the goods, or
 The buyer does something which is similar to his act of accepting the
goods, e.g., pledges the goods or sells away the goods, or
 The buyer retains the goods without giving notice of rejection
beyond the period fixed or reasonable period if no time is fixed.
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 TRANSFER OF TITLE BY NON-OWNERS
 GENERAL RULE
 No one can give that which he has not

 To protect property rights.

 EXCEPTIONS:
 Transfer of title by Estoppel.(Sec.27)
 Sale by Mercantile Agent.(Sec. 27)
 Sale by joint owner/co-owner(Sec.28)
 Sale by person in possession under voidable contract.
(Sec.29)
 Sale by a seller in possession after sale.(Sec.30(1))
 Sale by a buyer in possession of goods.(Sec.30(2))
 Sale by an Unpaid Seller.(Sec. 54)

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Rights of Unpaid Seller

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 UNPAID SELLER AND HIS RIGHTS
UNPAID SELLER:-
Seller :- A person who sells the goods or agrees to
sell the goods is called seller.
Unpaid :- It means payment is not made or without
payment. In simple words, "Unpaid seller" means a person who has sold
the goods for a price but price has not been paid to him.
Sales act defines the "unpaid seller" in the following words :
Unpaid Seller Is A Person :-
i. To whom the whole price has not been paid or tendered.
ii. And where a bill of exchange or other negotiable instruments has
been accepted by him as a condition on which it was received has
not been fulfilled by reason of dishonor of the instrument or
otherwise.
EXAMPLE: Party A sells a car on cash basis to party B
and the price has not been received yet. 42
 RIGHTS OF UNPAID SELLER
Rights of unpaid seller

Right against goods Right against the buyer personally

When the property in the Suit for price

goods has been transferred

Right of Lien Suit for damages for non

acceptance
Right of stoppage in
goods in transit
Suit for special damage
Right to resale and interest

When the property in the

goods has not been transferred

Right of withholding delivery

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Right against the goods
A. When the property in the goods has been transferred
1.RIGHT OF LIEN[Sec 46(1)(a) and 47 to 49]
The right of lien means lawfully right to
retain the goods possession until the full price
is received. An unpaid seller can exercise his right of lien
in following cases. Sec 47-49
I. Where the goods have been sold on the cash basis.
II. Where the goods have been sold on credit basis and
the term of credit has expired.
III. Where the buyer has become insolvent even if the
period of credit has not been expired.
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2.RIGHT OF STOPPAGE IN TRANSIT[Sec. 50 to 52]
It means stoppage of goods while
they are in transit to take possession
until the price is paid (sec.50-52)
 Unpaid seller can stop the goods in transit in
the following cases.
1. While the buyer becomes insolvent.

2. While the goods are out of actual possession of

seller, but have not reached buyer’s possession i.e.
goods are in transit with carrier.
3. The unpaid seller can stop the goods in transit only
for payment of the price of the goods and not for
any other charges.
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 3.RIGHT TO RE-SALE

If a buyer fails to pay or offer the price within a

reasonable time, the unpaid seller has the right to
resell the goods in the following circumstances.
1. Where the goods are of perishable nature.

2. Where the unpaid seller has exercised his right of

lien or stoppage in transit and gives a notice to
buyer of his intension of resell the goods.
3. Where the unpaid seller has expressly reserved
his right of resale.
4. Where seller gives notice to the buyer of his
intension to resell and the buyer does not pay
within a reasonable time, he can 46
 REMEDIES FOR BREACH OF CONTRACT OF SALE
 Rights of Unpaid Seller Against the Buyer
Personally
 Suit for price(Sec. 55)
 Suit for damages for non-acceptance of the goods(Sec.56)
 Suit for special damages and interest (Sec. 61)
 Buyer’s Rights Against Seller
 Suit for damages for non-delivery of the goods(Sec.57)
 Suit for specific performance(Sec.58)
 Suit for breach of warranty(Sec.59)
 Suit for rescission of contract and for damages for breach of
‘condition’.
 Suit for recovery of price together with interest (Sec.61)

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THANK U

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